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PROSPECTUS
December 31, 1997
[Logo]
GRAND PRIX FUNDS, INC.
GRAND PRIX FUND
Wilton Executive Campus
15 River Road, Suite 220
Wilton, Connecticut 06897
Telephone: 1-800-432-4741
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Grand Prix Funds, Inc. ("Corporation") is an open-end, management
investment company, commonly referred to as a mutual fund. The Corporation
currently comprises one non-diversified portfolio: the Grand Prix Fund
("Fund"). The Fund's investment objective is capital appreciation. The Fund
seeks to achieve its investment objective by investing primarily in common
stocks of companies that exhibit fast earnings growth and are rising in price.
Target Holdings Corporation, doing business as Target Investors
(the "Advisor"), believes that the use of this momentum strategy has the
potential for higher returns than other investment strategies. Under federal
securities laws, the Fund is "not diversified." As a result, it may be
more vulnerable than a "diversified" fund to fluctuations in the value of the
companies in the Fund's portfolio.
This Prospectus contains information you should consider before you
invest in the Fund. Please read it carefully and keep it for future reference.
A Statement of Additional Information ("SAI") for the Fund, dated December 31,
1997, contains further information, is incorporated by reference into this
Prospectus, and has been filed with the Securities and Exchange Commission
("SEC"). The SAI, which may be revised from time to time, is available without
charge upon request to the Fund at the above-noted address or telephone number.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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CONTENTS
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INVESTOR EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
INVESTMENT STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . .5
IMPLEMENTATION OF POLICIES AND RISKS . . . . . . . . . . . . . . . . . .6
INVESTMENT OBJECTIVE AND RESTRICTIONS . . . . . . . . . . . . . . . . . .8
PRIOR PERFORMANCE OF THE ADVISOR . . . . . . . . . . . . . . . . . . . .9
FUND ORGANIZATION AND MANAGEMENT . . . . . . . . . . . . . . . . . . . .9
YOUR ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . 17
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN . . . . . . . . . . . . . . 17
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT . . . . . . . . 18
FUND PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 20
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the SAI, and
if given or made, such information or representations may not be relied upon as
having been authorized by the Fund. This Prospectus does not constitute an
offer to sell securities in any state or jurisdiction in which such offering
may not lawfully be made.
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INVESTOR EXPENSES
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The following information is provided to help you understand the various
costs and expenses that you, as an investor in the Fund, will bear directly or
indirectly.
SHAREHOLDER TRANSACTION EXPENSES(1)
Sales Load Imposed on Purchases ................................ None
Sales Load Imposed on Reinvested Dividends ..................... None
Deferred Sales Load ............................................ None
Redemption Fees ................................................ None
Exchange Fees .................................................. None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees ................................................ 1.00%
Rule 12b-1 Fees(2) ............................................. 0.25%
Other Expenses (after waivers or reimbursements)(3) ............ 0.40%
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Total Operating Expenses (after waivers or reimbursements)(3) .. 1.65%
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(1) There are certain charges associated with certain special shareholder
services offered by the Fund, including a $23 fee for returned checks or
electronic funds transfers and a $10 fee for wire redemptions. For
additional information, see "Your Account." Purchases and redemptions may
also be made through broker-dealers or other financial intermediaries who
may charge a commission or other transaction fee for their services.
(2) See "Distribution and Shareholder Servicing Plan" for detailed
information relating to the Rule 12b-1 distribution and shareholder
servicing plan ("Plan"). Consistent with the National Association of
Securities Dealers, Inc.'s ("NASD") rules, Rule 12b-1 fees could cause
long-term investors in the Fund to pay more than the economic equivalent
of the maximum front-end sales charges permitted under those rules.
(3) The Advisor has agreed to limit the total operating expenses of the Fund
(excluding interest, taxes, brokerage and extraordinary expenses) to an
annual rate of 1.65% of the Fund's average net assets until December 31,
1998. After such date, the expense limitation may be terminated or
revised at any time. Absent this limitation, other expenses and total
operating expenses of the Fund are estimated to be 0.87% and 2.12%,
respectively. For additional information, see "Fund Organization and
Management."
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and redemption at the end of each time period.
1 year $17
3 years $52
The Example is based on the above-described "Total Operating Expenses."
REMEMBER THAT THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF PAST OR
FUTURE EXPENSES AND THAT ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
SHOWN. The assumption in the Example of a 5% annual return is required by SEC
regulations. The assumed 5% annual return is not a prediction of, and does not
represent, the projected or actual performance of the Fund's shares.
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HIGHLIGHTS
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- - WHAT IS THE OBJECTIVE OF THE FUND?
The Fund's investment objective is capital appreciation. The Fund seeks
to achieve its investment objective by investing primarily in common stocks of
companies that the Advisor believes have the potential for revenue and earnings
growth superior to that of companies with similar market or business
characteristics. The Advisor will not consider dividend or interest income in
the selection of investments. See "Investment Strategy" and "Investment
Objective and Restrictions."
- - IN WHAT TYPES OF COMPANIES/SECURITIES WILL THE FUND INVEST?
The Advisor intends to invest primarily in common stocks of companies
which the Advisor characterizes as "growth" companies. The Fund's securities
selections will be made without regard to an issuer's market capitalization;
however, the Advisor anticipates that most investments will be made in
companies that have a small-to-medium market capitalization. In the Advisor's
opinion, a growth company is a company that is likely to experience positive
sales and earnings growth at above average rates.
Under normal circumstances, the Fund will be fully invested in common
stocks, except that a small portion of the Fund's assets may be held in
short-term money market securities and cash to pay redemption requests and Fund
expenses and pending investment. Under unusual circumstances, as a defensive
technique, the Fund may invest up to 35% of its total assets in cash and/or
money market instruments deemed by the Advisor to be consistent with a
temporary defensive posture. The Fund may but does not intend to leverage its
assets or invest in options, futures, derivative contracts, initial public
offerings or other exotic securities or arrangements. See "Implementation of
Policies and Risks."
In an effort to increase returns, the Fund expects to trade actively. The
annual portfolio turnover rate could range from 400 to 800% or higher but
generally will not exceed 1,500%. Higher portfolio turnover rates usually
generate additional brokerage commissions and expenses and the short-term gains
realized from these transactions are taxable to shareholders as ordinary
income. See "Implementation of Policies and Risks."
- - WHAT ARE THE POTENTIAL RISKS OF INVESTING IN THE FUND?
Equity securities fluctuate in value, often based on factors unrelated to
the value of the issuer of the securities, and such fluctuations can be
pronounced. Changes in the value of the Fund's investments will result in
changes in the value of its shares and thus the Fund's total return to
investors. In addition, because the Fund has elected not to be subject to the
diversification rules of the Investment Company Act of 1940, as amended ("1940
Act"), a relatively larger percentage of the Fund's assets may be invested in
relatively fewer companies than is typical of other mutual funds. This
non-diversification may increase volatility. See "Implementation of Policies
and Risks."
- - IS AN INVESTMENT IN THE FUND APPROPRIATE FOR ME?
The Fund is suitable for long-term investors only. It is not a short-term
investment vehicle. An investment in the Fund may be appropriate if you seek
capital appreciation; seek a mutual fund for the aggressive equity portion of
your portfolio; have no immediate financial requirements for this investment;
and are willing to accept a high degree of volatility.
The Fund is designed for investors who have the financial ability to
undertake greater risk in exchange for the opportunity to realize greater
financial gains in the future. See "Investment Objective and Restrictions."
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- - WHO WILL MANAGE MY INVESTMENT?
Target Investors ("Advisor") serves as investment advisor to the Fund. As
of September 30, 1997, the Advisor managed approximately $1 billion for
individual and institutional clients. See "Prior Performance of the
Advisor" and "Fund Organization and Management."
- - HOW CAN I PURCHASE OR REDEEM FUND SHARES?
You may purchase Fund shares at the Fund's net asset value. Fund shares
are sold without a sales charge. You may be charged a nominal fee if you effect
transactions in Fund shares through a securities dealer, bank or other
financial institution. No certificates are issued for shares. The Fund
reserves the right to reject any purchase order.
You may request redemption of Fund shares at any time. There are no
redemption charges. For redemptions by wire, however, there is a $10 fee.
When a redemption request is received in good order, the Fund will redeem the
shares at the Fund's next net asset value determined after receipt of the
request. See "Your Account."
The Fund has adopted a distribution and shareholder servicing plan under
Rule 12b-1 of the 1940 Act, which authorizes the Fund to pay a yearly
distribution and/or shareholder servicing fee of up to 0.25% of the average
daily net assets of the Fund. See "Your Account" and "Distribution and
Shareholder Servicing Plan."
The minimum initial investment is $5,000. Subsequent investments must be
at least $1,000. These minimums may be changed or waived at any time by the
Fund. See "Your Account."
- - WHAT IS THE FUND'S POLICY REGARDING DIVIDENDS AND OTHER DISTRIBUTIONS?
You should not expect income from the Fund. However, as required by law,
to avoid double taxation, the Fund will distribute substantially all of its net
realized capital gains and net investment income, if any, to shareholders
annually in the form of a distribution and/or dividend, taxable to you as
capital gain or ordinary income. In the absence of specific instructions to
the contrary, distributions and dividends will be reinvested in additional Fund
shares and will not be available for the payment of taxes. See "Implementation
of Policies and Risks" and "Dividends, Capital Gain Distributions and Tax
Treatment."
- - WHO SHOULD I CONTACT IF I HAVE QUESTIONS?
General inquiries regarding the Fund can be addressed to either your
investment professional or the Fund at the address or telephone number listed
on the cover page of this Prospectus.
INVESTMENT STRATEGY
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The Fund seeks to invest in the equity securities of companies, regardless
of size, which, in the opinion of the Advisor, will experience positive
earnings growth at an above average rate. Although the Advisor may invest in
companies of all sizes, the Advisor expects that most investments will be made
in companies with small to medium market capitalizations. The Advisor focuses
on companies which exhibit fast earnings growth and are rising in price. The
Advisor's general strategy is to be fully invested with at least 95% of assets
invested in equity securities. Although the Advisor's investment strategy is
based on company fundamentals, companies considered by the Advisor to be
"growth" companies are often in the same or related market sectors. Thus, the
Fund may be heavily invested in a single sector. One sector, however, like
technology, may include various industries, like networking,
telecommunications, software, semiconductors or voice-processing. The Fund may
be concentrated in one sector, while being diversified among several
industries. The Fund may take relatively large positions in a single issuer.
To the extent the Fund is concentrated, it will be susceptible to adverse
economic, political, regulatory or market developments affecting a single
sector, industry or issuer. Additionally, the Fund will invest in a limited
number of companies. This may increase the volatility of investment
performance. Furthermore, as a means to increase returns, the Fund expects to
trade actively. The annual portfolio turnover rate could range from 400 to
800% or higher but generally will not exceed 1,500%.
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When making purchase decisions for the Fund, the Advisor uses a "buy
discipline" that involves three key components: research, fundamentals, and
valuation. The Advisor develops its own research. Using a computer-driven
model, the Advisor screens for certain fundamental attributes that it believes
a "buy" candidate should possess, including (i) projected sales growth of 20%
or more; (ii) projected earnings growth of 20% or more; and (iii)
unexpected good earnings. The Advisor then assigns scores to the securities
based on such factors and ranks the securities accordingly. Pursuant to that
ranking, the Advisor constructs a list of securities for the Fund and purchases
the highest ranking securities for its portfolio. Companies are rescored and
the portfolio is rebalanced weekly for variations from expectations.
The Advisor makes sell decisions for the Fund based on two primary
factors: significant deterioration in the price of the securities or better
relative value in other securities.
IMPLEMENTATION OF POLICIES AND RISKS
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In implementing its investment strategy, the Fund may use the following
securities and investment techniques. Some of these securities and investment
techniques involve special risks, which are described below, elsewhere in this
Prospectus or in the Fund's SAI.
COMMON STOCKS AND OTHER EQUITY SECURITIES
The Fund will invest in common stocks and other equity securities. Other
equity securities may include depository receipts and warrants and other
securities convertible or exchangeable into common stock. Common stocks and
other equity securities generally increase or decrease in value based on the
earnings of a company and on general industry and market conditions. A fund
that invests a significant amount of its assets in common stocks and other
equity securities is likely to have greater fluctuations in share price than a
fund that invests a significant portion of its assets in fixed-income
securities.
SMALL AND MEDIUM MARKET CAPITALIZATION COMPANIES
The Fund may invest a substantial portion of its assets in small and
medium-sized companies. While small and medium-sized companies generally have
potential for rapid growth, investments in such companies often involve greater
risks than investments in larger, more established companies because small and
medium-sized companies may lack the management experience, financial resources,
product diversification, and competitive strengths of larger companies. In
addition, in many instances the securities of small and medium-sized companies
are traded only over-the-counter or on a regional securities exchange, and the
frequency and volume of their trading is substantially less than is typical of
larger companies. Therefore, the securities of small and medium-sized
companies may be subject to greater and more abrupt price fluctuations. When
making large sales, the Fund may have to sell portfolio holdings at discounts
from quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of small and medium-sized company
securities. Investors should be aware that, based on the foregoing factors, an
investment in the Fund may be subject to greater price fluctuations than an
investment in a fund that invests primarily in larger, more established
companies. The Advisor's research efforts may also play a greater role in
selecting securities for the Fund than in a fund that invests in larger, more
established companies.
UNSEASONED COMPANIES
The Fund may invest in securities of unseasoned companies. These are
companies that have been in operation less than three years, including the
operations of any of their predecessors. The securities of such companies may
have limited liquidity and the prices of such securities may be volatile. The
Fund currently intends to invest no more than 10% of its total assets in
securities of unseasoned companies. The Fund may only invest up to 5% of its
net assets in illiquid securities.
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NON-DIVERSIFICATION AND SECTOR CONCENTRATION
As a "non-diversified" fund, the Fund is permitted to invest its assets in
a more limited number of issuers than other investment companies. Under the
Internal Revenue Code of 1986 (the "Code"), however, for income tax purposes,
the Fund (i) may not invest more than 25% of its assets in the securities of
any one company or in the securities of any two or more companies controlled by
the Fund which, pursuant to regulations under the Code, may be deemed to be
engaged in the same, similar, or related trades or businesses and (ii) with
respect to 50% of its assets, may not invest more than 5% of its assets
in the securities of any one company and may not own more than 10% of the
outstanding voting securities of a single company. Thus, as a
"non-diversified" fund under the 1940 Act, the Fund may invest (i) up to 50% of
its assets in the securities of as few as two companies, up to 25% each, so
long as the Fund does not control the two companies or so long as the two
companies are engaged in different businesses and (ii) up to 50% of its assets
in the securities of as few as ten companies, up to 5% each, provided that, in
any event, the Fund does not own in excess of 10% of any company's outstanding
voting stock. This practice involves an increased risk of loss to the Fund if
the market value of a security should decline or its issuer were otherwise
unable to meet its obligations.
The Fund may invest more than 25% of its assets in securities of companies
in one or more market sectors, such as the technology or health care sector. A
market sector may be made up of companies in a number of different industries.
The Fund will only concentrate its investments in a particular market sector if
the Advisor believes that the potential investment return justifies the
additional risk associated with concentration in that sector.
The Fund may invest its assets in fewer than 25 companies. This strategy
may increase the volatility of investment performance and the Fund could incur
greater losses than funds that invest in a greater number of issuers.
PORTFOLIO TURNOVER
A change in the investments held by the Fund is known as "portfolio
turnover." The annual portfolio turnover rate for the Fund is expected to be
between 400 and 800% or higher but generally will not exceed 1,500%. High
portfolio turnover generally involves above-average expenses to the Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and reinvestment in other securities. In addition,
the short-term gains realized from these transactions are taxable to
shareholders as ordinary income. In fact, it is possible that 100% of all
capital gains and losses in any fiscal year may qualify as short-term.
TEMPORARY STRATEGIES
Prior to investing the proceeds from sales of Fund shares, to meet
ordinary daily cash needs, and to retain the flexibility to respond promptly to
changes in market and economic conditions, the Advisor may hold cash and/or
invest up to 35% of the Fund's total assets in short-term fixed-income
securities issued by private and governmental institutions. It is impossible
to predict when or for how long the Advisor may employ such strategies.
Short-term fixed income securities must be rated at least A or higher by
Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's") or Fitch
Investors Service, Inc. ("Fitch") or A- or higher by Duff & Phelps, Inc.
("D&P"), and include without limitation the following securities, each of which
has a stated maturity of one year or less from the date of purchase unless
otherwise indicated, or securities which the Advisor deems to be of comparable
quality to rated securities: U.S. government securities, including bills,
notes and bonds, differing as to maturity and rate of interest, which are
either issued or guaranteed by the U.S. Treasury or by U.S. governmental
agencies or instrumentalities; certificates of deposit issued against funds
deposited in a U.S. bank or savings and loan association; bank time deposits,
which are monies kept on deposit with U.S. banks or savings and loan
associations for a stated period of time at a fixed rate of interest; bankers'
acceptances which are short-term credit instruments used to finance commercial
transactions; commercial paper and commercial paper master notes (which are
demand instruments without a fixed maturity bearing interest at rates which are
fixed to known lending rates and automatically adjusted when such lending rates
change) rated A-1 or better by S&P, Prime-1 or better by Moody's, Duff 2 or
higher by D&P, or Fitch 2 or higher by Fitch; and repurchase agreements entered
into only with respect to obligations of the U.S. government, its agencies or
instrumentalities. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party to the agreement, including
possible delays or restrictions upon the Fund's ability to dispose of the
underlying securities. Additionally, the Fund may invest in short-term
investment vehicles of a custodian bank.
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ADRS
The Fund may invest up to 20% of its net assets in American Depositary
Receipts ("ADRs") or other foreign instruments denominated in U.S. dollars.
ADRs are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying foreign security and denominated in U.S. dollars.
Some institutions issuing ADRs may not be sponsored by the issuer. A
non-sponsored depository may not provide the same shareholder information that
a sponsored depository is required to provide under the contractual
arrangements with the issuer, including reliable financial statements.
Investments in securities of foreign issuers involve risks which are in
addition to the usual risks inherent in domestic investments. In many
countries there is less publicly available information about issuers than is
available in the reports and ratings published about companies in the United
States. Additionally, foreign countries are not subject to uniform accounting,
auditing and financial reporting standards. Other risks inherent in foreign
investments include expropriation; confiscatory taxation; withholding taxes on
dividends and interest; less extensive regulation of foreign brokers,
securities markets and issuers; costs incurred in conversions between
currencies; the possibility of delays in settlement in foreign securities
markets; limitations on the use or transfer of assets (including suspension of
the ability to transfer currency from a given country); the difficulty of
enforcing obligations in other countries; diplomatic developments; and
political or social instability. Foreign economies may differ favorably or
unfavorably from the U.S. economy in various respects, and many foreign
securities are less liquid and their prices are more volatile than comparable
U.S. securities. From time to time, foreign securities may be difficult to
liquidate rapidly without adverse price effects. Certain costs attributable to
foreign investing, such as custody charges and brokerage costs, are higher than
those attributable to domestic investing.
INVESTMENT OBJECTIVE AND RESTRICTIONS
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The Fund's investment objective is capital appreciation. This investment
objective is fundamental and cannot be changed without shareholder approval.
Under normal market conditions, the Fund will attempt to achieve this objective
by investing at least 65% of its assets in common stocks of companies which the
Advisor characterizes as "growth" companies. There can be no assurance that
the Fund will achieve its investment objective or that shares in the Fund will
be worth more at redemption than at acquisition. The Fund may also hold cash
and money market instruments to provide the Fund with liquidity and
flexibility.
In addition, the Fund has adopted certain fundamental investment
restrictions that, like the Fund's investment objective, may not be changed
without shareholder approval.
- LIMITATION ON BORROWING: The Fund may (i) borrow money from
banks for temporary or emergency purposes (but not for leverage or
the purchase of investments) and (ii) make other investments or
engage in other transactions permissible under the 1940 Act,
provided that the combination of (i) and (ii) shall not exceed
33-1/3% of the value of the Fund's total assets (including the
amount borrowed), less the Fund's liabilities (other than
borrowings). The Fund may also borrow money from other persons to
the extent permitted by applicable law.
- LIMITATION ON LENDING: The Fund may not make loans if, as a
result, more than 33-1/3% of the Fund's assets would be lent to
other persons, except through purchases of debt securities or other
debt instruments or engaging in repurchase agreements.
- LIMITATION ON "SENIOR SECURITIES": The Fund may not issue
senior securities, except as permitted under the 1940 Act.
All of the Fund's fundamental investment restrictions are described in the
Fund's SAI.
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PRIOR PERFORMANCE OF THE ADVISOR
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The following table shows the Advisor's historical performance data for a
bank commingled fund (the "Account") managed by the Advisor, for the periods
indicated, which is the only Account managed by the Advisor that has investment
objectives, policies, strategies, and risks substantially similar to those of
the Fund. The Account is not subject to the same types of expenses to which
the Fund is subject nor to the specific tax restrictions and investment
limitations imposed on the Fund by the Code and the 1940 Act. Consequently,
the performance results for the Account could have been adversely affected if
it had been regulated as an investment company under the federal tax and
securities laws.
The Account's performance has been calculated in accordance with
recommended standards of the Association for Investment Management and Research
("AIMR"). All returns presented were calculated on a total return basis and
include all dividends and interest, if any, accrued income, if any, and
realized and unrealized gains and losses. All returns are net of all fees
imposed upon the Account, including investment advisory fees, brokerage
commissions, and execution costs paid by the Account without provision for
federal or state income taxes. Cash and equivalents are included in
performance returns. Total return is calculated monthly in accordance with the
"time-weighted" rate of return method provided for by the AIMR standards,
accounted for on a trade-date and accrual basis. AIMR standards for
calculation of total return differ from the standards required by the SEC for
calculation of average annual total return. Principal additions and
withdrawals are weighted in computing the monthly returns based on the timing
of these transactions.
The following data is provided to illustrate the past performance of the
Advisor in managing an account which is substantially similar to the Fund as
measured against specified market indices and does not represent the
performance of the Fund. Investors should not consider this performance data
as an indication of the future performance of the Fund or the Advisor.
ACCOUNT PERFORMANCE THROUGH SEPTEMBER 30, 1997
Total Return
------------
Time Period Account S&P 500
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2nd Quarter 22.51% 17.46%
3rd Quarter 32.27% 7.49%
FUND ORGANIZATION AND MANAGEMENT
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ORGANIZATION
The Fund is a series of common stock of a corporation, Grand Prix Funds,
Inc. ("Corporation"), a Maryland company incorporated on October 30, 1997. The
Corporation is authorized to issue shares of common stock in series and
classes. Each share of common stock is entitled to one vote, and each share is
entitled to participate equally in dividends and capital gains distributions.
No certificates will be issued for shares held in your account. You will,
however, have full shareholder rights. Generally, the Fund will not hold
annual shareholders' meetings unless required by the 1940 Act or Maryland Law.
As of December 23, 1997, Target Capital Management, Ltd., an affiliate of the
Advisor, owned a controlling interest in the Fund.
MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors of the
Corporation is responsible for managing its business and affairs. The
Corporation has entered into an Investment Advisory Agreement with the
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Advisor under which the Advisor manages the Fund's investments and business
affairs, subject to the supervision of the Corporation's Board of Directors.
ADVISOR
The Advisor is a Florida corporation organized in February 1992. Under
the Investment Advisory Agreement, the Corporation pays the Advisor an annual
management fee of 1.00% of the Fund's average daily net assets. The advisory
fee is accrued daily and paid monthly. For the fiscal year ending December 31,
1998, the Advisor has agreed to waive its management fee and/or reimburse the
Fund's operating expenses to the extent necessary to ensure that the Fund's
total operating expenses do not exceed 1.65% of the Fund's average daily net
assets. After such date, the Advisor may voluntarily waive all or a portion of
its management fee and/or absorb certain Fund expenses without further
notification of the commencement or termination of such waiver or absorption.
Any waivers or absorptions will have the effect of temporarily lowering the
Fund's overall expense ratio and increasing the Fund's overall return to
investors. Under the Investment Advisory Agreement, not only is the Advisor
responsible for management of the Fund's assets, but also for portfolio
transactions and brokerage.
PORTFOLIO MANAGER
President of the Advisor, Robert Zuccaro received a Bachelor's Degree from
the University of Bridgeport in 1965 and a Master's in Business Administration
from Pace University in 1968. Prior to founding Advisor in 1983, Mr. Zuccaro
spent six years with Axe-Houghton, where he was President and Director of
Axe-Houghton Stock Fund and Vice President and Director of portfolio management
of E.W. Axe & Co. Mr. Zuccaro is a Chartered Financial Analyst.
CUSTODIAN AND TRANSFER AGENT
Fifth Third Bank ("Fifth Third") acts as custodian of the Fund's assets
("Custodian"). Sunstone Investor Services, LLC serves as transfer agent for
the Fund ("Transfer Agent").
ADMINISTRATOR
Pursuant to an Administration and Fund Accounting Agreement, Sunstone
Financial Group, Inc. performs certain compliance and tax reporting functions
for the Fund. For these services, Sunstone Financial Group, Inc. receives from
the Fund a fee, computed daily and payable monthly, based on the Fund's average
net assets at an annual rate beginning at 0.20% and decreasing as the assets of
the Fund reach certain levels, subject to an annual minimum of $65,000, plus
out-of-pocket expenses.
FUND EXPENSES
The Fund is responsible for its own expenses, including interest charges;
taxes; brokerage commissions; organizational expenses; expenses of registering
or qualifying shares for sale with the states and the SEC; expenses of issue,
sale, repurchase, or redemption of shares; expenses of printing and
distributing reports and prospectuses to existing shareholders; charges of
custodians; expenses for accounting, administrative, audit, and legal services;
fees for outside directors; expenses of fidelity bond coverage and other
insurance; expenses of indemnification; extraordinary expenses; and costs of
shareholder and director meetings.
YOUR ACCOUNT
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PURCHASING SHARES
The Fund is no-load, so you may purchase, redeem or exchange shares
directly at the Fund's net asset value without paying a sales charge. Because
the Fund's net asset value changes daily, your purchase price will be the next
net asset value determined after the Fund receives your purchase request in
good order. See "Determination of Net Asset Value."
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<PAGE> 11
INITIAL ADDITIONAL
MINIMUM MINIMUM
TYPE OF ACCOUNT INVESTMENT INVESTMENT
--------------- ---------- ----------
Regular $5,000 $1,000
Automatic Investment Plan $5,000 $1,000
Gift to Minors $5,000 $1,000
The Fund reserves the right to reject any order for the purchase of its
shares or to limit or suspend, without prior notice, the offering of its
shares. The required minimum investments may be waived in the case of
qualified retirement plans. The Fund will not accept your account if you are
investing for another person as attorney-in-fact. The Fund also will not accept
accounts with a "Power of Attorney" or "POA" in the registration section of the
Purchase Application.
OPENING AN ACCOUNT BY MAIL. Please complete the Purchase Application.
You may duplicate any application or you can obtain additional copies of the
Purchase Application from the Fund by calling 1-800-432-4741.
Your completed Purchase Application should be mailed directly to:
Grand Prix Funds, Inc.
P.O. Box 1177
Milwaukee, WI 53201-1177
To purchase shares by overnight or express mail, please use the following
street address:
Grand Prix Funds, Inc.
c/o Sunstone Investor Services, LLC
207 East Buffalo Street, Suite 315
Milwaukee, WI 53202-5712
All applications must be accompanied by payment in the form of a check
made payable to "Grand Prix Funds." All purchases must be made in U.S. dollars
and checks must be drawn on U.S. banks. No cash, credit cards or third party
checks will be accepted. Payment may be delayed for up to 10 calendar days on
redemption requests for recent purchases made by check in order to ensure that
the check has cleared. If you contemplate redeeming your investment shortly
after purchase, you should purchase the shares by wire as discussed below.
OPENING AN ACCOUNT BY WIRE. You may make purchases by direct wire
transfers. To ensure proper credit to your account, you must call the Fund at
1-800-432-4741 for instructions and to obtain an investor account number prior
to wiring funds. Funds should be wired through the Federal Reserve System as
follows:
Fifth Third Bank
A.B.A. Number: 042000314
For credit to: Grand Prix Funds
Account Number: 729-00729
For further credit to:
(investor account number)
(name or account registration)
(Social Security or Taxpayer Identification Number)
A Purchase Application must be received by the Fund to establish
privileges and to verify your account information. Payment of redemption
proceeds may be delayed and taxes may be withheld unless the Fund receives
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<PAGE> 12
a properly completed and executed purchase application. The Fund reserves the
right to refuse a telephone transaction if it believes it advisable to do so.
If you have any questions, please call the Fund at 1-800-432-4741.
ADDING TO AN ACCOUNT BY MAIL. You may make additional investments by mail
or by wire in the minimums listed previously. When adding to an account by
mail, you should send your check to the Fund, together with a subsequent
investment slip from a recent statement. If this investment slip is
unavailable, you should send a signed note giving the full name of the account
and the account number. See "Additional Purchase Information" for more
information regarding purchases made by check or electronic funds transfer.
ADDING TO AN ACCOUNT BY ELECTRONIC FUNDS TRANSFER. You may also make
additional investments by telephone or in writing through electronic funds
transfers if you have previously selected this service. By selecting this
service, you authorize the Fund to draw on your preauthorized bank account as
shown on the records of the Fund and receive the proceeds by electronic funds
transfer. Electronic funds transfers may be made commencing 10 business days
after receipt by the Fund of your request to adopt this service. This time
period allows the Fund to verify your bank information. Investments made by
electronic funds transfer in any one account must be in an amount of at least
$1,000 and will be effective at the net asset value next computed after receipt
by the Fund of the proceeds from your bank account. See "Additional Purchase
Information" for more information regarding purchases made by check. Changes
to bank information must be made in writing and signed by all registered
holders of the account with the signatures guaranteed by a commercial bank or
trust company in the United States, a member firm of the NASD or other eligible
guarantor institution. A Notary Public is not an acceptable guarantor. This
service may be selected by calling the Fund at 1-800-432-4741 for the necessary
form and instructions.
ADDING TO AN ACCOUNT BY WIRE. For additional investments made by wire
transfer, you should use the wiring instructions listed previously. Be sure to
include your account number. Wired funds are considered received in good order
on the day they reach the Fund's bank account by the Fund's cut-off time for
purchases and all required information is provided in the wire instructions.
The wire instructions will determine the terms of the purchase transaction.
AUTOMATIC INVESTMENT PLAN. You may make purchases of shares of the Fund
automatically on a regular basis ($1,000 minimum per transaction). You must
meet the Fund's minimum initial investment of $5,000 before the Automatic
Investment Plan (the "Plan" or the "AIP Plan") may be established. Under the
Plan, your designated bank or other financial institution debits a
preauthorized amount on your account each designated period and applies the
amount to the purchase of Fund shares. The Fund requires 10 business days
after receipt of your request to initiate the Plan to verify your account
information. Generally, the Plan will begin on the next transaction date
scheduled by the Fund for the Plan following this 10 business day period. AIP
Plan transactions are scheduled for the fifth and/or twentieth of every month.
AIP Plan transactions also may be scheduled monthly, quarterly or annually.
The Plan can be implemented with any financial institution that is a member of
the Automated Clearing House. No service fee is currently charged by the Fund
for participation in the Plan. You will receive a statement on a quarterly
basis showing the purchases made under the Plan. A $23 fee will be imposed by
the Fund if sufficient funds are not available in your account or your account
has been closed at the time of the automatic transaction and your purchase will
be canceled. You will also be responsible for any losses suffered by the Fund
as a result. When a purchase is made pursuant to the Plan, and a redemption of
such shares is requested shortly thereafter, the Fund may delay payment of the
redemption proceeds until the Fund verifies that the proceeds used to purchase
the shares were properly debited from your designated bank or other financial
institution. You may adopt the Plan at the time an account is opened by
completing the appropriate section of the Purchase Application. You may obtain
an application to establish the Plan after an account is opened by calling the
Fund at 1-800-432-4741. A signature guarantee is required. In the event you
discontinue participation in the Plan, the Fund reserves the right to redeem
your Fund account involuntarily, upon 60 days' written notice, if the account's
net asset value is $5,000 or less. Changes to bank information must be made in
writing and signed by all registered holders of the account with the signatures
guaranteed by a commercial bank or trust company in the United States, a member
firm of the NASD or other eligible guarantor institution. A Notary Public is
not an acceptable guarantor. A redemption of all funds from your Plan account
will automatically discontinue plan privileges.
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<PAGE> 13
PURCHASING SHARES THROUGH OTHER INSTITUTIONS. If you purchase shares
through a program of services offered or administered by a broker-dealer,
financial institution, or other service provider, you should read the program
materials, including information relating to fees, in addition to the Fund's
Prospectus. Certain services of the Fund may not be available or may be
modified in connection with the program of services provided. The Fund may
only accept requests to purchase additional shares into a broker-dealer street
name account from the broker-dealer.
Certain broker-dealers, financial institutions, or other service providers
that have entered into an agreement with the Corporation may enter purchase
orders on behalf of their customers by telephone, with payment to follow
within several days as specified in the agreement. The Fund may effect such
purchase orders at the net asset value next determined after receipt of the
telephone purchase order. It is the responsibility of the broker-dealer,
financial institution, or other service provider to place the order with the
Fund on a timely basis. If payment is not received within the time specified
in the agreement, the broker-dealer, financial institution, or other service
provider could be held liable for any resulting fees or losses.
ADDITIONAL PURCHASE INFORMATION. The Fund will charge a $23 service fee
against your account for any check or electronic funds transfer that is
returned unpaid and your purchase will be canceled. You will also be
responsible for any losses suffered by the Fund as a result. In order to
relieve you of responsibility for the safekeeping and delivery of stock
certificates, the Fund does not issue certificates.
When a purchase is made by check and a redemption is requested shortly
thereafter, payment may be delayed for up to 10 calendar days on redemption
requests for recent purchases made by check in order to ensure that the check
has cleared. This delay allows the Fund to verify that proceeds used to
purchase Fund shares will not be returned due to insufficient funds and is
intended to protect the remaining investors from loss.
New shareholders of the Fund are automatically provided with the privilege
to initiate telephone inquiries, exchanges and redemptions unless expressly
waived by the shareholder. Consequently, Purchase Applications provide that
investors automatically authorize the telephone privileges unless they check
the appropriate box on the Purchase Application to waive the privilege. If you
have any questions as to how to waive this privilege, or how to add or delete a
privilege after an account is established, please call the Fund at
1-800-432-4741. Generally, after the account has been established, a request
to authorize, waive, add or delete a privilege must be in writing and signed by
each registered holder of the account with signatures guaranteed by a
commercial bank or trust company in the United States, a member of the NASD or
other eligible guarantor institution. A Notary Public is not an acceptable
guarantor. For a more detailed discussion of the rights, responsibilities and
risks of telephone transactions, please refer to "Redeeming by Telephone."
EXCHANGING SHARES
You may exchange all or a portion of your investment from the Grand Prix
Fund to the Fountain Square U.S. Treasury Obligations Fund (the "Money Market
Fund"). This exchange feature is subject to the minimum purchase and
redemption amounts set forth in this Prospectus ($5,000 minimum, $1,000
subsequent). You may obtain a copy of the Money Market Fund prospectus from
the Fund by calling 1-800-432-4741, and you are advised to read it carefully,
before authorizing any investment in shares of the Money Market Fund.
Generally, exchange requests received in good order and accepted by the
Fund by the close of the New York Stock Exchange ("Exchange"), generally 4:00
p.m. Eastern Time, on a day during which the Fund's net asset value is
determined will be effective that day for both the Fund being purchased and the
Fund being redeemed. Please note that when exchanging from the Fund to the
Money Market Fund, you will begin accruing income from the Money Market Fund
the day following the exchange. When exchanging less than all of the balance
from the Money Market Fund to the Fund, your exchange proceeds will exclude
accrued and unpaid income from the Money Market Fund through the date of
exchange. When exchanging your entire balance from the Money Market Fund,
accrued income will automatically be exchanged into the Fund when the income is
collected and paid
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<PAGE> 14
from the Money Market Fund, at the end of the month. An exchange between the
Fund and the Money Market Fund is treated the same as an ordinary sale and
purchase for federal income tax purposes.
Because of the risks associated with common stock investments, the Fund is
intended to be a long-term investment vehicle and is not designed to provide
investors with a means of speculating on short-term stock market movements. In
addition, because excessive trading can hurt the Fund's performance and
shareholders, the Fund reserves the right to temporarily or permanently
terminate, with or without advance notice, the exchange privilege of any
investor who makes excessive use of the exchange privilege (e.g., more than
five exchanges per calendar year). Your exchanges may be restricted or refused
if the Fund receives or anticipates simultaneous orders affecting significant
portions of the Fund's assets. In particular, a pattern of exchanges with a
"market timer" strategy may be disruptive to the Fund. Therefore, the maximum
number of exchanges you wish to make may be restricted. Contact the Fund for
additional information concerning the exchange privilege.
AUTOMATIC EXCHANGE PLAN. You may make automatic monthly exchanges from
the Money Market Fund account to a Fund account ($1,000 minimum per
transaction). An exchange from one Fund to another is treated the same as an
ordinary sale and purchase for federal income tax purposes and generally, you
will realize a capital gain or loss. You must meet the Fund's minimum initial
investment requirements before this plan is established. You may adopt the
plan at the time an account is opened by completing the appropriate section of
the Purchase Application. To establish the Automatic Exchange Plan after an
account is open, call the Fund at 1-800-432-4741.
New shareholders of the Fund are automatically provided with the privilege
to initiate telephone inquiries, exchanges and redemptions unless expressly
waived by the shareholder. Consequently, Purchase Applications provide that
investors automatically authorize the telephone privileges unless they check
the appropriate box on the Purchase Application to waive the privilege. If you
have any questions as to how to waive this privilege, or how to add or delete a
privilege after an account is established, please call the Fund at
1-800-432-4741. Generally, after the account has been established, a request
to authorize, waive, add or delete a privilege must be in writing and signed by
each registered holder of the account with signatures guaranteed by a
commercial bank or trust company in the United States, a member of the NASD or
other eligible guarantor institution. A Notary Public is not an acceptable
guarantor. For a more detailed discussion of the rights, responsibilities and
risks of telephone transactions, please refer to "Redeeming by Telephone."
REDEEMING SHARES
You may redeem shares of the Fund at any time. The price at which the
shares will be redeemed is the net asset value per share next determined after
proper redemption instructions are received by the Fund. See "Determination of
Net Asset Value." There are no charges for the redemption of shares except
that a fee of $10 is charged for each wire redemption and a $15 fee is charged
when redeeming shares in an IRA. Refer to the IRA Disclosure Statement and
Custodial Agreement for additional information on IRA accounts and fees.
Depending upon the redemption price you receive, you may realize a capital gain
or loss for federal income tax purposes.
REDEEMING BY MAIL. To redeem shares by mail, simply send an unconditional
written request to the Fund specifying the number of shares or dollar amount to
be redeemed, the name(s) on the account registration and the account number.
If the dollar amount requested to be redeemed is greater than the current
account value as determined by the net asset value on the effective date of the
redemption, the entire account balance will be redeemed. A request for
redemption must be signed exactly as the shares are registered. If the amount
requested is greater than $10,000, the proceeds are to be sent to a person
other than the shareholder(s) of record, to a location other than the address
of record or is made within 30 days of an address exchange, each signature must
be guaranteed by a commercial bank or trust company in the United States, a
member firm of the NASD or other eligible guarantor institution. A Notary
Public is not an acceptable guarantor. Additional documentation may be
required for the redemption of shares held in corporate, partnership or
fiduciary accounts. See "Additional Redemption Information" for instructions
on redeeming shares in corporate accounts. Additional documentation is
required for the redemption of shares held by persons acting pursuant to a
Power of Attorney. In case of any questions, contact the Fund in advance.
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<PAGE> 15
The Fund will mail payment for redemption proceeds within seven days after
it receives proper instructions for redemption. However, the Fund may delay
payment on redemptions of recent purchases made by check until the Fund
verifies that the check used to purchase Fund shares will not be returned due
to insufficient funds. This is intended to protect the remaining investors
from loss.
REDEEMING BY TELEPHONE. Shares may be redeemed, in an amount up to
$10,000, by calling the Fund at 1-800-432-4741. Proceeds redeemed by telephone
will be mailed to your address, or wired or transmitted by electronic funds
transfer to your preauthorized bank account as shown on the records of the
Fund. A redemption request in excess of $10,000 must be made in writing and
signed by each registered holder of the account with signatures guaranteed by a
commercial bank or trust company in the United States, a member firm of the
NASD or other eligible guarantor institution. A Notary Public is not an
acceptable guarantor. A telephone redemption request will not be processed
within 30 calendar days after an address change. A redemption request within
that 30 day time period must be in writing and signed by each registered holder
of the account with signatures guaranteed. A Notary Public is not an
acceptable guarantor. Telephone redemptions must be in amounts of $1,000 or
more.
Payment of the redemption proceeds for Fund shares redeemed by telephone
when you request wire payment will normally be made in federal funds on the
next business day. There is currently a $10 fee for each wire redemption. It
will be deducted from your redemption proceeds. Electronically transferred
funds will ordinarily arrive at your bank within two to three banking days
after transmission. To change the designated account, send a written request
with the signature(s) guaranteed to the Fund. Once the funds are transmitted,
the time of receipt and the availability of the funds are not within the Fund's
control. The Fund reserves the right to delay payment for a period of up to
seven days after receipt of the redemption request.
The Fund reserves the right to refuse a telephone redemption or exchange
transaction if it believes it is advisable to do so. Procedures for redeeming
or exchanging shares of the Fund by telephone may be modified or terminated by
the Fund at any time. In an effort to prevent unauthorized or fraudulent
redemption or exchange requests by telephone, the Fund has implemented
procedures designed to reasonably assure that telephone instructions are
genuine. These procedures include: requesting verification of certain personal
information; recording telephone transactions; confirming transactions in
writing; and restricting transmittal of redemption proceeds to preauthorized
designations. Other procedures may be implemented from time to time. If
reasonable procedures are not implemented, the Fund may be liable for any loss
due to unauthorized or fraudulent transactions. In all other cases, you are
liable for any loss for unauthorized transactions.
You should be aware that during periods of substantial economic or market
change, telephone or wire redemptions may be difficult to implement. If you
are unable to contact the Fund by telephone, you may also redeem shares by
delivering or mailing the redemption request to: Grand Prix Funds, Inc., P.O.
Box 1177, Milwaukee, WI 53201-1177. If you wish to send the information via
overnight delivery, you may send it to: Grand Prix Funds, Inc., c/o Sunstone
Investor Services, LLC, 207 East Buffalo Street, Suite 315, Milwaukee, WI
53202-5712. Redemption requests made via fax will not be accepted by the Fund.
REDEEMING SHARES THROUGH OTHER INSTITUTIONS. Investors may be charged a
fee if they redeem shares of the Fund through a broker or an agent.
ADDITIONAL REDEMPTION INFORMATION. When a purchase is made by check and a
redemption is requested shortly thereafter, payment may be delayed on
redemption requests for recent purchases made by check until the Fund verifies
that proceeds used to purchase Fund shares will not be returned due to
insufficient funds. This is intended to protect the remaining investors from
loss.
New shareholders of the Fund are automatically provided with the privilege
to initiate telephone inquiries, exchanges and redemptions unless expressly
waived by the shareholder. Consequently, Purchase Applications provide that
investors automatically authorize the telephone privileges unless they check
the appropriate box on the Purchase Application to waive the privilege. If you
have any questions as to how to waive this privilege, or how to
15
<PAGE> 16
add or delete a privilege after an account is established, please call the Fund
at 1-800-432-4741. Generally, after the account has been established, a
request to authorize, waive, add or delete a privilege must be in writing and
signed by each registered holder of the account with signatures guaranteed by a
commercial bank or trust company in the United States, a member of the NASD or
other eligible guarantor institution. A Notary Public is not an acceptable
guarantor. For a more detailed discussion of the rights, responsibilities and
risks of telephone transactions, please refer to "Redeeming by Telephone."
Any redemption or transfer of ownership request for corporate accounts
will require the following written documentation:
1. A written letter of instruction signed by the required number of
authorized officers, along with their respective positions. For
redemption requests in excess of $10,000, the written request must be
signature guaranteed. A signature guarantee may be obtained from a
commercial bank or trust company in the United States, a member firm
of the NASD or other guarantor and "Signature Guaranteed" must appear
with the signature. A Notary Public is not an acceptable guarantor.
2. A certified Corporate Resolution that states the date the
Resolution was adopted and who is empowered to act, transfer or sell
assets on behalf of the corporation.
3. If the Corporate Resolution is more than 60 days old from the
date of the transaction request, a Certificate of Incumbency from the
Corporate Secretary which specifically states that the officer or
officers named in the resolution have the authority to act on the
account. The Certificate of Incumbency must be dated within 60 days
of the requested transaction. If the Corporate Resolution confers
authority on officers by title and not by name, the Certificate of
Incumbency must name the officer(s) and their title(s).
The Fund reserves the right to suspend or postpone redemptions during any
period when: trading on the Exchange is restricted, as determined by the SEC,
or the Exchange is closed for other than customary weekend and holiday closing;
the SEC has by order permitted such suspension; or an emergency, as determined
by the SEC, exists, making disposal of portfolio securities or valuation of net
assets of the Fund not reasonably practicable.
Due to the relatively high cost of maintaining small accounts, if your
account balance falls below the $5,000 minimum as a result of a redemption or
exchange, you may be given a 60-day notice to reestablish the minimum balance.
If this requirement is not met, your account may be closed and the proceeds
sent to you. If your account balance in the Money Market Fund is redeemed,
accrued interest will be paid at the end of the following month.
SHAREHOLDER REPORTS AND INFORMATION
The Fund will provide the following statements and reports:
CONFIRMATION STATEMENTS. Except for AIP Plan transactions, after each
transaction that affects the account balance or account registration, you will
receive a confirmation statement. Participants in the Plan will receive
quarterly confirmations of all automatic transactions.
ACCOUNT STATEMENTS. All shareholders will receive quarterly account
statements. If you need additional copies of previous statements, you may
order statements for the current and preceding year at no charge. Statements
for earlier years are available for $5 each. Call 1-800-432-4741 to order past
statements. If you need information on your account with the Fund or if you
wish to submit any applications, redemption requests, inquiries or
notifications, you should contact: Grand Prix Funds, Inc., P.O. Box 1177,
Milwaukee, WI 53201-1177 or call 1-800-432-4741. If you wish to send the
information via overnight delivery, you may send it to: Grand Prix Funds, Inc.,
c/o Sunstone Investor Services, LLC, 207 East Buffalo Street, Suite 315,
Milwaukee, WI 53202-5712.
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<PAGE> 17
FINANCIAL REPORTS. Financial reports are provided to shareholders
semi-annually. Annual reports will include audited financial statements. To
reduce Fund expenses, one copy of each report will be mailed to each Taxpayer
Identification Number even though the investor may have more than one account
in the Fund.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share is determined as of the close of trading
(generally 4:00 p.m. Eastern Time) on each day the Exchange is open
for business. Purchase orders and redemption requests received in good order
on a day the Exchange is open for trading, prior to the close of trading on
that day, will be valued as of the close of trading on that day. Applications
for purchase of shares and requests for redemption of shares received after the
close of trading on the Exchange will be valued as of the close of trading on
the next day the Exchange is open. The Fund is not required to calculate its
net asset value on days during which the Fund receives no orders to purchase or
redeem shares. Net asset value per share is calculated by taking the fair
value of the Fund's total assets, including interest or dividends accrued,
but not yet collected, less all liabilities, and dividing by the total number
of shares outstanding. The result, rounded to the nearest cent, is the net
asset value per share.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are
valued at fair value. Common stocks and other equity-type securities are
valued at the last sales price on the national securities exchange or NASDAQ on
which such securities are primarily traded; however, securities traded on a
national securities exchange or NASDAQ for which there were no transactions on
a given day, and securities not listed on a national securities exchange or
NASDAQ, are valued at the average of the most recent bid and asked prices. Any
securities or other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Directors of the Corporation or its delegate. The Board of Directors may
approve the use of pricing services to assist the Fund in the determination of
net asset value. All money market instruments with maturities less than 60
days will be valued on an amortized cost basis.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
- --------------------------------------------------------------------------------
The Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the
"12b-1 Plan"). The 12b-1 Plan provides for the payment of a 12b-1 fee of up to
0.25% of the average daily net assets to finance activities primarily intended
to result in the sale of Fund shares. The Fund is authorized to, in turn, pay
all or a portion of these fees to any registered securities dealer, financial
institution, or other person ("Recipient") who renders assistance in
distributing or promoting the sale of Fund shares, or who provides certain
shareholder services to Fund shareholders, pursuant to a written agreement
("Rule 12b-1 Related Agreement"). The 12b-1 Plan is a "reimbursement" plan,
which means that the fees paid by the Fund under the Plan are intended as
reimbursement for services rendered and commission fees borne up to the maximum
allowable distribution and shareholder servicing fees. If more money for
services rendered and commission fees is due than is immediately payable
because of the expense limitation under the Plan, the unpaid amount is carried
forward from period to period while the Plan is in effect until such time as it
may be paid. No interest, carrying, or other finance charges will be borne by
the Fund with respect to unpaid amounts carried forward. Payment of the
distribution and servicing fees is to be made quarterly, within 30 days after
the close of the quarter for which the fee is payable.
The 12b-1 Plan, including a form of the 12b-1 Related Agreement, has been
unanimously approved by the Board of Directors of the Corporation, including
all of the members of the Board who are not "interested persons" of the
Corporation as defined in the 1940 Act and who have no direct or indirect
financial interest in the operation of the 12b-1 Plan or any related agreements
("Disinterested Directors") voting separately.
The 12b-1 Plan, and any Rule 12b-1 Related Agreement which is entered
into, will continue in effect for a period of more than one year only so long
as its continuance is specifically approved at least annually by a vote of a
majority of the Corporation's Board of Directors, and of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting on the
12b-1 Plan, or the Rule 12b-1 Related Agreement, as applicable. In addition,
the 12b-1 Plan, and any Rule 12b-1 Related Agreement, may be terminated without
penalty, by vote of a majority of the Fund's
17
<PAGE> 18
outstanding voting securities, or by vote of a majority of Disinterested
Directors (on not more than sixty (60) days' written notice in the case of the
Rule 12b-1 Related Agreement only).
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT
- --------------------------------------------------------------------------------
The Fund intends to qualify for treatment as a "Regulated Investment
Company" under Subchapter M of the Code and, if so qualified, will not be
liable for federal income taxes to the extent earnings are distributed to
shareholders on a timely basis. However, for federal income tax purposes, all
dividends and distributions of net realized short-term capital gains you
receive from the Fund are taxable as ordinary income, whether reinvested in
additional shares or received in cash, unless you are exempt from taxation or
entitled to a tax deferral. Distributions of net realized long-term capital
gains you receive from the Fund, whether reinvested in additional shares or
received in cash, are taxable as a capital gain. The capital gain holding
period is determined by the length of time the Fund has held the security and
not the length of time you have held shares in the Fund. You will be informed
annually as to the amount and nature of all dividends and capital gains paid
during the prior year. Such capital gains and dividends may also be subject to
state or local taxes. If you are not required to pay taxes on your income, you
are generally not required to pay federal income taxes on the amounts
distributed to you.
The Fund intends to pay dividends from net investment income annually and
to distribute all net realized capital gains at least annually. In addition,
the Fund may make additional distributions if necessary to avoid imposition of
a 4% excise tax or other tax on undistributed income and gains. Please note,
however, that the objective of the Fund is capital appreciation, not the
production of distributions. You should measure the success of your investment
by the value of your investment at any given time and not by the distributions
you receive.
When a dividend or capital gain is distributed, the Fund's net asset value
decreases by the amount of the payment. If you purchase shares shortly before
a distribution, you will be subject to income taxes on the distribution, even
though the value of your investment (plus cash received, if any) remains the
same. All dividends and capital gain distributions will automatically be
reinvested in additional Fund shares at the then prevailing net asset value
unless you specifically request that dividends or capital gains or both be paid
in cash. The election to receive dividends or reinvest them may be changed by
writing to the Fund at Grand Prix Funds, Inc., P.O. Box 1177, Milwaukee, WI
53201-1177. The election is effective for distributions with a dividend record
date on or after the date on which the Fund receives notice of the election.
If you do not furnish the Fund with your correct social security number or
taxpayer identification number, the Fund is required by current federal law to
withhold federal income tax from your distributions (including applicable Fund
share reinvestments) and redemption proceeds at a rate of 31%.
This section is not intended to be a full discussion of federal income tax
laws and the effect of such laws on you. There may be other federal, state, or
local tax considerations applicable to a particular investor. You are urged to
consult your own tax advisor.
FUND PERFORMANCE
- --------------------------------------------------------------------------------
The Fund may from time to time compare its investment results to various
passive indices or other mutual funds and cite such comparisons in reports to
shareholders, sales literature, and advertisements. The results may be
calculated on several bases, including average annual total return, total
return and cumulative total return.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in the Fund over a
specified period of time, assuming the reinvestment of all dividends and
distributions. Average annual total return figures are annualized and
therefore represent the average annual percentage change over the specified
period. Total return figures are not annualized and represent the aggregate
percentage or dollar value change over the period. Cumulative total return
simply reflects performance over a stated period of time.
18
<PAGE> 19
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
DIRECTORS
Robert Zuccaro
Phillipp Villhauer
Mary Jane Boyle
Edward F. Ronan, Jr.
Dennis K. Waldman
OFFICERS
Robert Zuccaro, President
Phillipp Villhauer, Vice-President and Secretary
Mary Jane Boyle, Vice-President and Treasurer
INVESTMENT ADVISOR
TARGET HOLDINGS CORPORATION, D.B.A. TARGET INVESTORS
15 River Road, Suite 220
Wilton, Connecticut 06897
CUSTODIAN
FIFTH THIRD BANK
38 Fountain Square Plaza
Cincinnati, Ohio 45263
ADMINISTRATOR
SUNSTONE FINANCIAL GROUP, INC.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
TRANSFER AGENT
SUNSTONE INVESTOR SERVICES, LLC
For overnight deliveries, use: For regular mail deliveries, use:
Grand Prix Funds, Inc. Grand Prix Funds, Inc.
c/o Sunstone Investor Services, LLC P.O. Box 1177
207 East Buffalo Street, Suite 315 Milwaukee, WI 53201-1177
Milwaukee, Wisconsin 53202-5712
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
111 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
19
<PAGE> 20
LEGAL COUNSEL
GODFREY & KAHN, S.C.
780 N. Water Street
Milwaukee, Wisconsin 53202
20
<PAGE> 21
STATEMENT OF ADDITIONAL INFORMATION
GRAND PRIX FUNDS, INC.
GRAND PRIX FUND
Wilton Executive Campus
15 River Road, Suite 220
Wilton Connecticut 06897
Telephone: 1-800-432-4741
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the GRAND PRIX FUND ("Fund"), dated
December 31, 1997. The Prospectus, which may be revised from time to time, is
available without charge upon request to the above-noted address or telephone
number.
This Statement of Additional Information is dated December 31, 1997.
<PAGE> 22
CONTENTS
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INVESTMENT OBJECTIVE AND RESTRICTIONS...............................3
INVESTMENT POLICIES AND TECHNIQUES..................................4
DIRECTORS AND OFFICERS..............................................6
PRINCIPAL SHAREHOLDERS..............................................7
INVESTMENT ADVISOR..................................................8
FUND TRANSACTIONS AND BROKERAGE.....................................8
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT.............9
PLAN OF DISTRIBUTION................................................9
TAXES..............................................................10
DETERMINATION OF NET ASSET VALUE...................................10
SHAREHOLDER MEETINGS...............................................11
PERFORMANCE INFORMATION............................................11
INDEPENDENT AUDITORS...............................................12
FINANCIAL STATEMENTS...............................................12
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information ("SAI") and the Prospectus dated December 31, 1997, and if given or
made, such information or representations may not be relied upon as having been
authorized by the Fund. This SAI does not constitute an offer to sell
securities in any state or jurisdiction in which such offering may not lawfully
be made.
2
<PAGE> 23
INVESTMENT OBJECTIVE AND RESTRICTIONS
- -------------------------------------------------------------------------------
The Fund's investment objective is capital appreciation. The Fund's
investment objective and policies are described in detail in the Prospectus
under the captions "Investment Objective and Restrictions" and "Implementation
of Policies and Risks." The following are the Fund's fundamental investment
restrictions which cannot be changed without shareholder approval.
The Fund:
1. May not issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended (the "1940 Act");
2. May not act as an underwriter of another company's securities, except to
the extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933, as amended, in connection with the
purchase and sale of portfolio securities;
3. May not purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options, futures contracts, or
other derivative instruments, or from investing in securities or other
instruments backed by physical commodities);
4. May not make loans if, as a result, more than 33 1/3% of the Fund's
assets would be lent to other persons, except through purchases of debt
securities or other debt instruments or engaging in repurchase agreements;
5. May not invest more than 25% of its assets in securities of companies in
any one industry;
6. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prohibit
the Fund from purchasing or selling securities or other instruments backed
by real estate or of issuers engaged in real estate activities);
7. May (i) borrow money from banks for temporary or emergency purposes (but
not for leverage or the purchase of investments), and (ii) make other
investments or engage in other transactions permissible under the 1940
Act, which may involve a borrowing, provided that the combination of (i)
and (ii) shall not exceed 33 1/3% of the value of the Fund's total assets
(including the amount borrowed), less the Fund's liabilities (other than
borrowings). The Fund may also borrow money from other persons to the
extent permitted by applicable law;
8. Notwithstanding any other fundamental investment policy or restriction,
may invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objective, policies, and restrictions.
The following non-fundamental operating policies may be changed by the
Board of Directors without shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, or
unless it covers such short sale as required by the current rules and
positions of the Securities and Exchange Commission ("SEC") or its staff,
and provided that transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not deemed to
constitute selling securities short.
2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts,
options on futures contracts, or other derivative instruments shall not
constitute purchasing securities on margin.
3
<PAGE> 24
3. Invest in illiquid securities if, as a result of such investment, more
than 5% of its net assets would be invested in illiquid securities.
4. Purchase securities of other investment companies except in compliance
with the 1940 Act.
5. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act
("CEA") and, in accordance with Rule 4.5, will use futures or options on
futures transactions solely for bona fide hedging transactions (within the
meaning of the CEA); provided, however, that the Fund may, in addition to
bona fide hedging transactions, use futures and options on futures
transactions if the aggregate initial margin and premiums required to
establish such positions, less the amount by which any such options
positions are in the money (within the meaning of the CEA), do not exceed
5% of the Fund's net assets.
6. Make any loans other than loans of portfolio securities, except through
purchases of debt securities or other debt instruments or engaging in
repurchase agreements with respect to portfolio securities.
7. Borrow money except from banks or through reverse repurchase agreements
or mortgage dollar rolls, and will not purchase securities when bank
borrowings exceed 5% of its assets.
Except for the fundamental investment restrictions listed above and the
Fund's investment objective, the other investment policies described in the
Prospectus and this SAI are not fundamental and may be changed with approval of
the Fund's Board of Directors. Unless noted otherwise, if a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in percentage resulting from a change in the Fund's assets (i.e., due
to cash inflows or redemptions) or in market value of the investment or the
Fund's assets will not constitute a violation of that restriction.
INVESTMENT POLICIES AND TECHNIQUES
- -------------------------------------------------------------------------------
The following information supplements the discussion of the Fund's
investment objective, strategy, and policies that are described in the
Prospectus under the captions "Investment Strategy," "Implementation of
Policies and Risks," and "Investment Objective and Restrictions."
DEPOSITARY RECEIPTS
The Fund may invest in foreign securities by purchasing depositary
receipts, including American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs") or other securities convertible into securities of
companies based in foreign countries. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets, while EDRs, in
bearer form, may be denominated in other currencies and are designed for use in
European securities markets. ADRs are receipts typically issued by a U.S. bank
or trust company evidencing ownership of the underlying securities. EDRs are
European receipts evidencing a similar arrangement. For purposes of the Fund's
investment policies, ADRs and EDRs are deemed to have the same classification
as the underlying securities they represent. Thus, an ADR or EDR representing
ownership of common stock will be treated as common stock.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. For
example, a non-sponsored depositary may not provide the same shareholder
information that a sponsored depositary is required to provide under its
contractual arrangements with the issuer, including reliable financial
statements. Under the terms of most sponsored arrangements, depositaries agree
to distribute notices of shareholder meetings and voting instructions, and to
provide shareholder communications and other information to the ADR holders at
the request of the issuer of the deposited securities.
4
<PAGE> 25
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities, which are bonds,
debentures, notes, preferred stocks, or other securities that may be converted
into or exchanged for a specified amount of common stock or warrants of the
same or a different company within a particular period of time at a specified
price or formula. A convertible security entitles the holder to receive
interest normally paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted, or
exchanged. Convertible securities have unique investment characteristics in
that they generally (i) have higher yields than common stocks, but lower yields
than comparable non-convertible securities, (ii) are less subject to
fluctuation in value than the underlying stock (or warrant) since they have
fixed income characteristics, and (iii) provide the potential for capital
appreciation if the market price of the underlying common stock (or warrant)
increases. A convertible security may be subject to redemption at the option
of the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Fund is called for
redemption, the Fund will be required to permit the issuer to redeem the
security, convert it into the underlying common stock (or warrant), or sell it
to a third party.
NON-DIVERSIFICATION AND SECTOR CONCENTRATION
While the Fund is "non-diversified," which means that it is permitted to
invest its assets in a more limited number of issuers than other investment
companies, the Fund intends to diversify its assets to qualify for tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended ("Code"). To so qualify (i) not more than 25% of the total
value of the Fund's assets may be invested in securities of any one issuer
(other than U.S. Government securities and the securities of other regulated
investment companies under the Code) or of any two or more issuers controlled
by the Fund, which, pursuant to the regulations under the Code, may be deemed
to be engaged in the same, similar, or related trades or businesses, and (ii)
with respect to 50% of the total value of the Fund's assets (a) not more than
5% of its total assets may be invested in the securities of any one issuer
(other than U.S. Government securities and the securities of other regulated
investment companies under the Code) and (b) the Fund may not own more than 10%
of the outstanding voting securities of any one issuer (other than U.S.
Government securities and the securities of other regulated investment
companies under the Code).
In addition, the Fund has adopted a fundamental investment restriction
which prohibits the Fund from investing more than 25% of its assets in
securities of companies in any one industry. An industry is defined as a
business-line subsector of a stock-market sector. While the Fund may be
heavily invested in one single market sector like technology or health care,
for example, it will not invest more than 25% of its assets in securities of
companies in any one industry. While the Fund may be heavily invested in
technology or any other market sector from time to time, rotation in asset
management may be experienced.
To the extent that a relatively high percentage of the Fund's assets may
be invested in the securities of a limited number of companies, the Fund's
portfolio securities may be more susceptible to any single economic, political,
or regulatory occurrence than the portfolio securities of a diversified
investment company.
TEMPORARY STRATEGIES
As described in the Prospectus under the heading "Implementation of
Policies and Risks," prior to investing proceeds from sales of Fund shares, to
meet ordinary daily cash needs, and to retain the flexibility to respond
promptly to changes in market and economic conditions, the Fund may hold cash
and/or invest up to 35% of its total assets in money market instruments. The
money market instruments which the Fund may purchase include U.S. Government
securities, bank obligations, obligations of savings institutions, fully
insured certificates of deposit, commercial paper, and securities issued by
registered investment companies holding themselves out as money market funds.
Such securities include:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes, and bonds;
5
<PAGE> 26
BANK OBLIGATIONS. Obligations (including certificates of deposit,
bankers' acceptances, commercial paper (see below) and other debt obligations)
of banks subject to regulation by the U.S. Government and having total assets
of $1 billion or more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic banks;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or the
Savings Association Insurance Fund (each of which is administered by the
Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and to 5% or less of the Fund's total assets in all such
obligations and in all illiquid assets, in the aggregate;
COMMERCIAL PAPER. Commercial paper rated Prime-1 or better by Moody's
Investors Service, Inc. ("Moody's"), A-1 or better by Standard & Poor's
Corporation ("S&P"), Duff 2 or higher by Duff & Phelps, Inc. ("D&P"), or Fitch
2 or higher by Fitch Investor Services, Inc. ("Fitch"); and
MONEY MARKET FUNDS. Securities issued by registered investment companies
holding themselves out as money market funds which attempt to maintain a stable
net asset value of $1.00 per share.
DIRECTORS AND OFFICERS
- -------------------------------------------------------------------------------
The directors and officers of Grand Prix Funds, Inc. ("Corporation"), of
which the Fund is a series, together with information as to their principal
business occupations during the last five years, and other information, are
shown below. Each director and officer who is deemed an "interested person" as
defined in the 1940 Act is indicated by an asterisk. Mr. Zuccaro has served as
a director and officer of the Corporation since its inception on October 30,
1997. The other directors and officers have served as such since December 10,
1997.
*ROBERT ZUCCARO, President and a Director of the Corporation.
Mr. Zuccaro, 55 years old, received a Bachelor's Degree from the
University of Bridgeport in 1965 and a Master's Degree in Business
Administration from Pace University in 1968. Prior to founding what is now
Target Holdings Corporation, doing business as Target Investors ("Advisor") in
1983, Mr. Zuccaro spent six years with Axe-Houghton, where he was President and
Director of Axe-Houghton Stock Fund and Vice President and Director of
portfolio management of E.W. Axe & Co. Mr. Zuccaro is a Chartered Financial
Analyst.
Mr. Zuccaro's address is 15 River Road, Suite 220, Wilton, Connecticut
06897.
*PHILLIPP VILLHAUER, Vice-President, Secretary and a Director of the
Corporation.
Mr. Villhauer, 32 years old, earned a Master's Degree in Business
Administration from Fordham University in 1994. Prior to joining Advisor as a
portfolio manager/analyst in 1993, Mr. Villhauer was a trader at Brown Brothers
Harriman & Company and an Assistant Vice-President Trader/Analyst at Gabelli &
Company, Inc.
Mr. Villhauer's address is 15 River Road, Suite 220, Wilton, Connecticut
06897.
*MARY JANE BOYLE, Vice-President, Treasurer and a Director of the
Corporation.
Ms. Boyle, 52 years old, earned a Master's Degree from the University of
Bridgeport in 1971. Prior to co-founding Advisor in 1983, where she serves as
Vice-President, Client Service, Ms. Boyle was a Regional Sales Director with
Mondessa Enterprises, Inc.
Ms. Boyle's address is 15 River Road, Suite 220, Wilton, Connecticut
06897.
6
<PAGE> 27
EDWARD F. RONAN, JR., a Director of the Corporation.
Mr. Ronan, 45 years old, earned a B.S. in accounting from the University
of Bridgeport in 1977. Mr. Ronan is a C.P.A. and a member of Actis-Grande,
Ronan, Carbone & Company, LLC, a certified public accounting firm and has been
with the firm since 1984. Mr. Ronan has also served as a director of 2.E.P.
Co., Inc., a flooring tool manufacturer and distributor, since 1993.
Mr. Ronan's address is 30 Main Street, Danbury, Connecticut 06810.
DENNIS K. WALDMAN, a Director of the Corporation.
Mr. Waldman, 43 years old, graduated from the Massachusetts Institute of
Technology in 1976 with a Bachelor's of Science degree in aeronautical and
astronautical engineering and in electrical engineering and in 1978 with a
Master's of Science degree in aeronautical and astronautical engineering.
Since 1994, Mr. Waldman has served as Vice-President of Sales for Strategic
Information Associates, prior to which time, Mr. Waldman worked at ITS as
Vice-President of Sales. From 1992 to 1994, Mr. Waldman was a sales
representative at Tartan where he was involved in engineering sales.
Mr. Waldman's address is 62 Windsor Road, Waban, Massachusetts 02168.
As of December 23, 1997, officers and directors of the Corporation did not
beneficially own any of the shares of common stock of the Fund's then
outstanding shares; however, Target Capital Management, Ltd., which is an
affiliate of the Advisor and controlled by Mr. Zuccaro, owned 100% of such
shares. Directors and officers of the Corporation who are also officers,
directors, employees, or shareholders of Advisor do not receive any
remuneration from the Fund for serving as directors or officers.
The following table provides information relating to annual compensation
to be paid to directors of the Corporation for their services as such:
Name Cash Compensation Other Compensation Total
- -------------------- ----------------- ------------------ -----
Robert Zuccaro $ 0 $ 0 $ 0
Phillipp Villhauer $ 0 $ 0 $ 0
Mary Jane Boyle $ 0 $ 0 $ 0
Edward F. Ronan, Jr. $ 500 $ 0 $ 500
Dennis K. Waldman $ 500 $ 0 $ 500
PRINCIPAL SHAREHOLDERS
As of December 23, 1997, the following persons owned of record or are
known by the Fund to own of record or beneficially 5% or more of the
outstanding shares of the Fund:
Name and Address No. Shares Percentage
------------------------------- ---------- ----------
Target Capital Management, Ltd. 10,000 100%
15 River Road, Suite 200
Wilton, Connecticut 06897
Based on the foregoing, as of December 23, 1997, Target Capital
Management, Ltd. owned a controlling interest in the Fund. Shareholders with a
controlling interest could effect the outcome of proxy voting or the direction
of management of the Fund.
7
<PAGE> 28
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
Target Holdings Corporation, d.b.a. Target Investors ("Advisor") is the
investment advisor to the Fund. The Advisor is controlled by Robert Zuccaro
who owns 80% of the Advisor.
The investment advisory agreement between the Corporation and the Advisor
dated as of December 31, 1997 ("Advisory Agreement") has an initial term of two
years and thereafter is required to be approved annually by the Board of
Directors of the Corporation or by vote of a majority of the Fund's outstanding
voting securities (as defined in the 1940 Act). Each annual renewal must also
be approved by the vote of a majority of the Corporation's directors who are
not parties to the Advisory Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement was approved by the Board of Directors, including a
majority of the disinterested directors on December 10, 1997, and by the
initial shareholder on December 23, 1997. The Advisory Agreement is terminable
without penalty on 60 days' written notice by the Board of Directors, by vote
of a majority of the Fund's outstanding voting securities, or by the Advisor,
and will terminate automatically in the event of its assignment.
Under the terms of the Advisory Agreement, the Advisor manages the Fund's
investments and business affairs, subject to the supervision of the Board of
Directors. At its expense, the Advisor provides office space and all necessary
office facilities, equipment, and personnel for managing the investments of the
Fund. As compensation for its services, the Corporation pays the Advisor an
annual management fee of 1.00% of the Fund's average daily net assets. The
advisory fee is accrued daily and paid monthly. The organizational expenses of
the Fund were advanced by the Advisor and will be reimbursed by the Fund over a
period of not more than 60 months. The organizational expenses were
approximately $80,750.
The Advisor has agreed to limit the total operating expenses of the Fund
(excluding interest, taxes, brokerage and extraordinary expenses) to an annual
rate of 1.65% of the Fund's average net assets until December 31, 1998. After
such date, the Advisor may from time to time voluntarily (but is not required
or obligated to) waive all or a portion of its fee and/or absorb certain Fund
expenses. Any waiver of fees or absorption of expenses will be made on a
monthly basis and, with respect to the latter, will be paid to the Fund by
reduction of Advisor's fee.
FUND TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Under the Advisory Agreement, Advisor, in its capacity as portfolio
manager, is responsible for decisions to buy and sell securities for the Fund
and for the placement of the Fund's securities business, the negotiation of the
commissions to be paid on such transactions, and the allocation of portfolio
brokerage business. The Fund has no obligation to deal with any particular
broker or dealer; in executing transactions, the Advisor seeks to obtain the
best execution at the best security price available with respect to each
transaction. The best price to the Fund means the best net price without
regard to the mix between purchase or sale price and commission, if any. While
the Advisor seeks reasonably competitive commission rates, the Fund does not
necessarily pay the lowest available commission. Brokerage will not be
allocated based on the sale of the Fund's shares.
Section 28(e) of the Securities Exchange Act of 1934, as amended ("Section
28(e)"), permits an investment advisor, under certain circumstances, to cause
an account to pay a broker or dealer who supplies brokerage and research
services a commission for effecting a transaction in excess of the amount of
commission another broker or dealer would have charged for effecting the
transaction. Brokerage and research services include (a) furnishing advice as
to the value of securities, the advisability of investing, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; (b) furnishing analyses and reports concerning issuers,
industries, sectors, securities, economic factors and trends, portfolio
strategy, and the performance of accounts; and (c) effecting securities
transactions and performing functions incidental thereto (such as clearance,
settlement, and custody).
In selecting brokers or dealers, Advisor considers investment and market
information and other research, such as economic, securities, and performance
measurement research provided by such brokers or dealers and the quality and
reliability of brokerage services, including execution capability, performance,
and financial responsibility.
8
<PAGE> 29
Accordingly, the commissions charged by any such broker or dealer may be
greater than the amount another firm might charge if Advisor determines in good
faith that the amount of such commissions is reasonable in relation to the
value of the research information and brokerage services provided by such
broker or dealer to the Fund. Advisor believes that the research information
received in this manner provides the Fund with benefits by supplementing the
research otherwise available to the Fund. Such higher commissions will not be
paid by the Fund unless (a) Advisor determines in good faith that the amount is
reasonable in relation to the services in terms of the particular transaction
or in terms of Advisor's overall responsibilities with respect to the accounts,
including the Fund, as to which it exercises investment discretion; (b) such
payment is made in compliance with the provisions of Section 28(e) and other
applicable state and federal laws; and (c) in the opinion of Advisor, the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term.
Advisor places portfolio transactions for other advisory accounts in
addition to the Fund. Research services furnished by firms through which the
Fund effects its securities transactions may be used by Advisor in servicing
all of its accounts; not all of such services may be used by Advisor in
connection with the Fund. Advisor believes it is not possible to measure
separately the benefits from research services to each of the accounts
(including the Fund) managed by it. Because the volume and nature of the
trading activities of the accounts are not uniform, the amount of commissions
in excess of those charged by another broker or dealer paid by each account for
brokerage and research services will vary. However, Advisor believes such
costs to the Fund will not be disproportionate to the benefits received by the
Fund on a continuing basis. Advisor seeks to allocate portfolio transactions
equitably whenever concurrent decisions are made to purchase or sell securities
by the Fund and another advisory account. In some cases, this procedure could
have an adverse effect on the price or the amount of securities available to
the Fund. There can be no assurance that a particular purchase or sale
opportunity will be allocated to the Fund. In making such allocations between
the Fund and other advisory accounts, certain factors considered by Advisor are
the respective investment objectives, the relative size of portfolio holdings
of the same or comparable securities, the availability of cash for investment,
and the size of investment commitments generally held.
The Fund anticipates that its annual portfolio turnover rate will be
between 400 and 800% or higher but generally will not exceed 1,500%. The
annual portfolio turnover rate indicates changes in the Fund's securities
holdings; for instance, a rate of 100% would result if all the securities in a
portfolio (excluding securities whose maturities at acquisition were one year
or less) at the beginning of an annual period had been replaced by the end of
the period. The turnover rate may vary from year to year, as well as within a
year, and may be affected by portfolio sales necessary to meet cash
requirements for redemptions of the Fund's shares.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
- --------------------------------------------------------------------------------
As custodian of the Fund's assets, Fifth Third Bank ("Fifth Third"), 38
Fountain Square Plaza, Cincinnati, Ohio 45263, has custody of all securities
and cash of the Fund, delivers and receives payment for portfolio securities
sold, receives and pays for portfolio securities purchased, collects income
from investments, if any, and performs other duties, all as directed by the
officers of the Corporation. Sunstone Investor Services, LLC ("Sunstone"), 207
East Buffalo Street, Suite 315, Milwaukee, Wisconsin 53202-5712, acts as
transfer agent and dividend-disbursing agent for the Fund.
PLAN OF DISTRIBUTION
- --------------------------------------------------------------------------------
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
As described more fully in the Prospectus under the heading "Distribution
and Shareholder Servicing Plan," the Fund has adopted a plan pursuant to Rule
12b-1 under the 1940 Act ("Plan") with respect to which certain distribution
and shareholder servicing fees may be paid to registered securities dealers,
financial institutions, or other persons ("Recipients") who render assistance
in distributing or promoting the sale of Fund shares, or who provide certain
shareholder services to Fund shareholders, pursuant to a written agreement
("Rule 12b-1 Related Agreement"). Under the terms of the Plan, the Fund may be
required to pay the Recipients a fee of up to 0.25% of the average daily net
assets to finance activities primarily intended to result in the sale of Fund
shares. The Plan is a "reimbursement" plan, which means that the fees paid by
the Fund under the Plan are intended as reimbursement for services rendered
9
<PAGE> 30
and commission fees borne up to the maximum allowable distribution and
shareholder servicing fees. If more money for services rendered and commission
fees is due than is immediately payable because of the expense limitation under
the Plan, the unpaid amount is carried forward from period to period while the
Plan is in effect until such time as it may be paid. No interest, carrying, or
other finance charges will be borne by the Fund with respect to unpaid amounts
carried forward.
ANTICIPATED BENEFITS TO THE FUND
The Board of Directors of the Corporation considered various factors in
connection with its decision to approve the Plan, including: (a) the nature
and causes of the circumstances which make implementation of the Plan necessary
and appropriate; (b) the way in which the Plan would address those
circumstances, including the nature and potential amount of expenditures; (c)
the nature of the anticipated benefits; (d) the merits of possible alternative
plans or pricing structures; and (e) the possible benefits of the Plan to any
other person relative to those of the Fund.
Based upon its review of the foregoing factors and the material presented
to it, and in light of its fiduciary duties under relevant state law and the
1940 Act, the Board of Directors determined, in the exercise of its business
judgment, that the Plan was reasonably likely to benefit the Fund and its
shareholders in at least one or several potential ways. Specifically, the
Board concluded that any Recipients operating under Rule 12b-1 Related
Agreements would have little or no incentive to incur promotional expenses on
behalf of the Fund if a Rule 12b-1 plan were not in place to reimburse them,
thus making the adoption of the Plan important to the initial success and
thereafter, continued viability of the Fund. In addition, the Board determined
that the payment of Rule 12b-1 fees to these persons should motivate them to
provide an enhanced level of service to Fund shareholders, which would, of
course, benefit such shareholders. Finally, the adoption of the Plan would
help to increase net assets under management in a relatively short amount of
time, given the marketing efforts on the part of the Recipients to sell Fund
shares, which should result in certain economies of scale.
While there is no assurance that the expenditure of Fund assets to finance
distribution of Fund shares will have the anticipated results, the Board of
Directors believes there is a reasonable likelihood that one or more of such
benefits will result, and since the Board will be in a position to monitor the
distribution and shareholder servicing expenses of the Fund, it will be able to
evaluate the benefit of such expenditures in deciding whether to continue the
Plan.
TAXES
- --------------------------------------------------------------------------------
As indicated under "Dividends, Capital Gain Distributions and Tax
Treatment" in the Prospectus, the Fund intends to qualify annually as a
"regulated investment company" under the Code. This qualification does not
require government supervision of the Fund's management practices or policies.
A dividend or capital gains distribution received shortly after the
purchase of shares reduces the net asset value of shares by the amount of the
dividend or distribution and, although in effect a return of capital, will be
subject to income taxes. Net gains on sales of securities when realized and
distributed are taxable as capital gains. If the net asset value of shares
were reduced below a shareholder's cost by distribution of gains realized on
sales of securities, such distribution would be a return of investment although
taxable as indicated above.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
As set forth in the Prospectus under the same heading, the Fund's net
asset value will be determined as of the close of trading on each day the New
York Stock Exchange ("NYSE") is open for trading. The Fund does not determine
net asset value on days the NYSE is closed and at other times described in the
Prospectus. The NYSE is closed on New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the NYSE will not be open for
trading on the preceding Friday and when such holiday falls on a Sunday, the
NYSE will not be open for trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a monthly or the yearly
accounting period.
10
<PAGE> 31
SHAREHOLDER MEETINGS
- --------------------------------------------------------------------------------
Maryland law permits registered investment companies, such as the
Corporation, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the 1940 Act.
The Corporation has adopted the appropriate provisions in its Bylaws and may,
at its discretion, not hold an annual meeting in any year in which the election
of directors is not required to be acted on by shareholders under the 1940 Act.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As described in the "Fund Performance" section of the Fund's Prospectus,
the Fund's historical performance or return may be shown in the form of various
performance figures. The Fund's performance figures are based upon historical
results and are not necessarily representative of future performance. Factors
affecting the Fund's performance include general market conditions, operating
expenses, and investment management.
TOTAL RETURN
The average annual total return of the Fund is computed by finding the
average annual compounded rates of return over the periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the stated periods at the end
of the stated periods.
Performance for a specific period is calculated by first taking an investment
(assumed to be $1,000) ("initial investment") on the first day of the period
and computing the "ending value" of that investment at the end of the period.
The total return percentage is then determined by subtracting the initial
investment from the ending value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains dividends paid by the Fund have been
reinvested at the Fund's net asset value on the reinvestment dates during the
period. Total return may also be shown as the increased dollar value of the
hypothetical investment over the period.
Cumulative total return represents the simple change in value of an
investment over a stated period and may be quoted as a percentage or as a
dollar amount. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in
order to illustrate the relationship between these factors and their
contributions to total return.
COMPARISONS
From time to time, in marketing and other Fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, may be cited. Lipper performance figures
are based on changes in net asset value, with all income and capital gains
dividends reinvested. Such calculations do not include the effect of any sales
charges imposed by other mutual funds. The Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and portfolio holdings.
11
<PAGE> 32
The Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. ("Morningstar"), which ranks funds on the
basis of historical risk and total return. Morningstar's rankings range from
five stars (highest) to one star (lowest) and represent Morningstar's
assessment of the historical risk level and total return of a fund as a
weighted average for 3, 5, and 10 year periods. Rankings are not absolute or
necessarily predictive of future performance.
Evaluations of the Fund's performance made by independent sources may also
be used in advertisements concerning the Fund, including reprints of or
selections from, editorials or articles about the Fund. Sources for Fund
performance and articles about the Fund may include publications such as Money,
Forbes, Kiplinger's, Financial World, Business Week, U.S. News and World
Report, the Wall Street Journal, Barron's, and a variety of investment
newsletters.
The Fund may compare its performance to a wide variety of indices and
measures of inflation. There are differences and similarities between the
investments that the Fund may purchase and the investments measured by these
indices.
Investors may want to compare the Fund's performance to that of
certificates of deposit offered by banks and other depository institutions.
Certificates of deposit may offer fixed or variable interest rates and
principal is guaranteed and may be insured. Withdrawal of the deposits prior
to maturity normally will be subject to a penalty. Rates offered by banks and
other depository institutions are subject to change at any time specified by
the issuing institution.
Investors may also want to compare the Fund's performance to that of money
market funds. Money market fund yields will fluctuate and shares are not
insured, but share values usually remain stable.
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Ernst & Young LLP, 111 East Kilbourn Avenue, Milwaukee, Wisconsin 53202,
have been elected as the independent auditors for the Fund.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following financial statements of the Fund are contained herein:
(a) Report of Independent Auditors.
(b) Statement of Assets and Liabilities.
(c) Notes to Statement of Assets and Liabilities.
12
<PAGE> 33
Report of Independent Auditors
To the Shareholder and
Board of Directors of
Grand Prix Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Grand Prix Fund, comprising the Grand Prix Funds, Inc. (the "Fund"), as of
December 23, 1997. This statement of assets and liabilities is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the statement
of assets and liabilities. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of assets and liabilities presentation. We
believe that our audit of the statement of assets and liabilities provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Grand
Prix Fund at December 23, 1997, in conformity with generally accepted
accounting principles.
/s/
ERNST & YOUNG LLP
Milwaukee, Wisconsin
December 23, 1997
<PAGE> 34
GRAND PRIX FUNDS, INC.
Grand Prix Fund
Statement of Assets and Liabilities
December 23, 1997
Assets:
Cash $100,000
Unamortized organization costs 80,750
Total assets 180,750
Liabilities:
Accrued organization costs $ 40,500
Payable to adviser 40,250
Total liabilities $ 80,750
Net assets $100,000
Represented by:
Capital stock, $0.01 par value
(500,000,000 shares authorized
and 10,000 shares outstanding) $ 100
Additional paid-in capital 99,900
Net Assets $100,000
Offering price, redemption price and
net asset value per share (based
on 10,000 shares of capital stock) $ 10.00
See accompanying notes to Statement of Assets and Liabilities.
<PAGE> 35
GRAND PRIX FUNDS,INC.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 23, 1997
(1) Organization
Grand Prix Funds, Inc. ("Grand Prix") was organized on October 29, 1997
as a Maryland Corporation and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end investment
company issuing its shares in series, each series representing a
distinct portfolio with its own investment objectives and policies. The
only series presently authorized is the Grand Prix Fund (the "Fund").
The Fund has had no operations other than those relating to
organizational matters, including the sale of 10,000 shares to
capitalize the Fund for cash in the amount of $100,000.
(2) Significant Accounting Policies
(a) Organization Costs
Costs incurred by the Fund in connection with its organization,
registration and the initial public offering of shares have been
deferred and will be amortized over the period of benefit, but not
to exceed five years from the date upon which the Fund commenced
its investment activities. If any of the original shares of the
Fund purchased by the initial shareholder are redeemed by any
holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the pro rata share of the
unamortized costs as of the date of redemption. The pro rata
share by which the proceeds are reduced will be derived by
dividing the number of original shares of the Fund being redeemed
by the total number of original shares outstanding at the time of
redemption.
(b) Federal Income Taxes
The Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment
company and to make the requisite distributions of income to its
shareholders which will be sufficient to relieve it from all or
substantially all federal income taxes.
<PAGE> 36
(3) Investment Adviser
The Fund has an agreement with Target Holdings Corporation d/b/a Target
Investors (the "Adviser") to furnish investment advisory services to the
Fund. Under the terms of this agreement, the Adviser is compensated at
1.00% of average daily net assets of the Fund. The Adviser has agreed
to reduce its fees and/or reimburse the Fund's expenses (exclusive of
brokerage, interest, taxes and extraordinary expenses) that exceed the
annual expense limitation of 1.65% of average daily net assets until
December 31, 1998.
(4) Administrator
Sunstone Financial Group, Inc. (the "Administrator") acts as
Administrator for the Fund. As compensation for its administrative
services and the assumption of certain administrative expenses, the
Administrator is entitled to a fee computed daily and payable monthly,
at an annual rate of 0.20% and decreasing as the assets of the Fund
reach certain levels, subject to an annual minimum of $65,000, plus
out-of-pocket expenses. The minimum annual fee is subject to an
automatic annual escalation of 6%.
The Administrator may periodically volunteer to reduce all or a portion
of its administrative fee with respect to the Fund. These waivers may
be terminated at any time at the Administrator's discretion. The
Administrator may not seek reimbursement of such voluntarily reduced
fees at a later date. The reduction of such fee will cause the yield of
the Fund to be higher than it would be in the absence of such reduction.
(5) Capital Stock
Grand Prix is authorized to issue Five Hundred Million (500,000,000)
shares of common stock with a par value of one cent ($0.01). The Board
of Directors is empowered to issue other series of Grand Prix shares
without shareholder approval.
